Power: a long-term vision
An infrastructural commodity, power requires a rather long-term vision for proper management based on both economics and demand/supply profiles.
Short-term measures to plug power shortages will always tend to be expensive and constitute an undue charge on the national treasury and economy.
In this context, this article looks at implications of the Nuclear Energy Vision 2050 and suggests some policy imperatives, while appreciating the vision as a step in the right direction whereby Pakistan plans to generate 40,000MW of electricity to increase the share of nuclear-based electricity to approximately 25pc in the electricity mix from the current 4.3pc. Interestingly, India is also pursuing the same target of 25pc nuclear-based electricity by 2050.
Internationally, the current share of nuclear energy is quite significant in the overall mix primarily due to its energy content and cost advantages. Moreover, nuclear energy is arguably a green and sustainable energy source as it entails zero CO2 emissions during electricity generation process and does not lead to climate change and greenhouse effects though operational safety and regulation are of paramount importance.
Pakistan Atomic Energy Commission’s (PAEC) targets of five reactors of 1,100MW each by 2030 and further 32 reactors of 1,100MW each by 2050 need careful evaluation in a broader perspective, given the constraints placed on Pakistan by the international nuclear establishment, overall national economic resources and limited uranium supplies.
Since Pakistan is a non-signatory
to the Treaty on Non-Proliferation of Nuclear Weapons (NPT) and the Nuclear Suppliers Group (NSG) forbids nuclear trade with non-NPT signatories, therefore, Pakistan should base its business case for its ‘nuclear vision’ on zero support from any of the traditional trade partners for nuclear matters.
It would be quite unrealistic to assume anything on the contrary, irrespective of the waivers granted to India, another non-NPT signatory, by IAEA pursuant to the India-US Civil Nuclear Agreement.
Therefore, based on current nuclear cooperation, the only trade partner that Pakistan can rely on for success of its nuclear vision is China. A member of the NSG, China maintains that its cooperation with Pakistan was ‘grandfathered’ before China became an NSG member and thus continues to support the nuclear sector in Pakistan.
The Chinese nuclear capability is progressing rapidly. It is a significant supplier having its own nuclear reactors now available for export. Generation-3 models such as ACPR1000 and the Hualong 1 (HPR1000) now offer double containment and provide improved seismic capability and thermal margins subsequent to Fukushima.
However, given the long-term and substantial business relationship that we will have to embark on with China to develop 40,000MW of generation capacity, it would make sense to fully utilise this opportunity and take this relationship beyond a transactional arrangement.
To ensure that the vision turns into a reality, Pakistan should strive to develop this relationship in a way that it is able to arrange for nuclear reactor’s development technology transfer, whereby, our engineers and companies progressively acquire reactor development technology either through a direct technology transfer or through cooperation, and initiate work on developing a robust local supply chain. Cross industry learning can guide us in this regard as precedence for such close and successful cooperation exists in the form of JF-17 fighter development.
However, sustained success of such an initiative will perhaps require significant restructuring of the nuclearbased power construct in the country while paving the way for involvement and development of different paradigms based on both commercial and technological innovation.
This should, in any case, be attempted to ensure development of an indigenous and internationally competitive nuclear power value chain.
The second aspect that is essential for the success of the nuclear vision is the timely availability of adequate financial resources. Nuclear power plants are capital-intensive projects and a typical plant in the West can cost anywhere between $6-10bn. However, costs are much cheaper in Asia and can vary based on location of plant.
The average overnight cost of nuclear plant in China is said to be around $3,500/kW, implying that a 1,000MW nuclear plant would entail an approximate capital expenditure of $3.5bn excluding financing cost and project cost escalations.
If Pakistan is considering setting up 37 additional plants by 2050, the total capital expenditure that we are looking at would be in excess of $130bn excluding financing costs and inflation. Financing options and timelines for these plants, therefore, will have to be considered carefully.
With limited economic resources at its disposal and increasing local demands combined with NSG embargo, Pakistan will unfortunately have no choice but to fall back on Chinese financial support to back up the nuclear vision.
The Chinese response to financial assistance will be tempered by their own economic situation going into the next decade with significant signs of slowdown already emerging within its economy.
In the absence of international funding arrangements for development of nuclear facilities, one cannot see the vision gaining much traction without, perhaps, the incremental participation of private sector into the nuclear energy sector on the pattern, which is followed by developed economies.
This could potentially be a gamechanger for the national economy, supplemented by the development of local supply chain and could contribute to development of a totally new industrial sector, leading to significant employment and investment growth.
Though nuclear power is very competitive with other forms of energy, providing a very stable and efficient source of electricity, taking into account externalities associated with fossil fuels such as CO2 emissions and environmental costs, nuclear power turns out to be very cheap source of energy only next to hydropower.
As per PAEC website, the average cost of nuclear electricity from Chashma 1 and 2 for 2013 was Rs6.35/kWh significantly lower than IPPs and Gencos.
Therefore, it is imperative that we work on this strategy of technology transfer and incremental private sector participation to ensure that the nuclear vision gains traction, the common person starts benefitting from this low cost source of electricity and Pakistan develops a new industrial vertical, which emerges as a low-cost alternative to West-oriented Nuclear Suppliers Group members.
International opinion, however, stays divided as we see countries mothballing nuclear plants, such as Germany and then we have countries moving ahead with all commercial force and power, such as China and India. Pakistan belongs to the latter’s category.